Nov 11, 2010

Gajah Tunggal eyeing 20% higher sales

Indonesia's largest tire maker PT Gajah Tunggal Tbk (GJTL) aims to reach a 10%-20% higher sales in 2011 on the back of output capacity surge.
Director Catharina Widjaja at Gajah Tunggal said the company's production capacity will gradually elevate as result of capacity expansion initiated in 2005 and estimated to accomplish by 2012.
"We target a 20%-25% increase in sales by the end of this year, while EBITDA is targeted to be US$170 million-US$180 million," she said.
In line with the sales increase, Gajah Tunggal is optimistic that gross margin will be steady at the high level of 15%-20%.
According to Catharina, Gajah Tunggal experienced a steep jump in gross margin at 23%, the highest ever, because it could put down cost of raw materials.
"In early 2009, we had bought raw materials. Suddenly, the auto market was slow down. However, in the second half, the market revived, so we could use the raw materials. This is why our gross margin reached 23%," she said.
But, she said it is impossible for Gajah Tunggal to keep a sustain gross market at 23%. The sustainable level of gross margin is around 15%-20%. "We could maintain at the level of 15%-20%, in line with the uptrend of rubber."
The company currently is underway to expand its tire capacity. It is building 2 new tire production plants.
In the presentation material submitted to Indonesia Stock Exchange late last week, Gajah Tunggal aims to set up one new plant for radial tire to boost production capacity from 30,000 tires per day to 45,000 tires.
A new plant for motorcycle tires are intended to lift up motorcycle tire capacity from 37,000 tires per day to 105,000 tires as well as tube tire from 74,500 tube tires per day to 162,000.
The company currently manages several main production plants. Radial facility operates 37,000 tires capacity with the utilization rate of 78% as of September 2010.
Motorcyle tire facility with the production capacity of 69,000 tires per day is now having the utilization rate of 84%.
Bias tire facility with 13,000 tires capacity is operated at 88% rate.
Synthetic rubber and tire cored facilities are managed with the utilization rate at 73% and 83% respectively.